Under current law, there are restrictions on how information
gathered about you by the Australian Tax Office (ATO) may be used.
The Tax Laws Amendment (Confidentiality of Taxpayer Information)
Bill 2009 currently before parliament weakens the protection
offered by these strict confidentiality provisions.
If the Bill becomes law, the ATO will be able to share
information about taxpayers with government agencies. Currently the
ATO can only provide ASIC, for example, with information about a
'serious offence'. Under the Bill, this limitation will be
weakened to include a wider range of less serious offences.
For the first time, the ATO may be able to provide information
about you or your business to Fair Work Australia to target
compliance with the Fair Work Act. If this Bill is passed, the
ATO's powers to collect information may become a 'back
door' for other government agencies to collect information
about you or your business.
This is particularly the case given a recent report by the
Commonwealth Ombudsman, which gives the ATO the green light to use
'access without notice' powers to collect information from
a particular taxpayer.
Taxation law says that the ATO has the right of full and free
access to all buildings, places, books, documents and other papers
for the purposes of enforcing the tax Acts. There are few
legislative restrictions on this power, and the ATO does not need
to believe, for example, that tax fraud or evasion has been
committed by a taxpayer before these powers can be used.
Additionally, the ATO does not need a search warrant to use these
This unrestricted right of access effectively means that
taxpayers have very limited legal remedies to stop the ATO
accessing their information.
Protecting your rights
When dealing with their tax affairs generally, taxpayers need to
be mindful of how the ATO uses its powers. In our experience, the
ATO uses all means available to it to collect information on
Consider the following example:
In 2008, the ATO used data purchased from the German tax
authorities to identify Australians who had money in European
banks. This data was originally stolen by a European bank employee
who sold it to the German Bundesnachrichtendienst (federal
intelligence agency) for ?4 million.
In February 2010, the German authorities announced that they
will again purchase stolen bank data - this time concerning bank
accounts in Switzerland. Given that the ATO has used stolen
European financial information in the past, it is expected they
will try to use the Swiss data to identify Australians who hold
money in Switzerland.
It is not illegal in itself for Australians to hold money or
assets overseas, but failure to disclose income derived from those
assets may result in criminal prosecution.
Further, the enormous amount of information the ATO holds,
stolen or otherwise, will inevitably mean that people will be
caught out, whether they have been involved in tax evasion or
If taxpayers receive correspondence from the ATO saying that
they have been identified as holding money overseas (sometimes
known as an 'AUSTRAC' letter), or they have other concerns
about the ATO's approach to offshore transactions, they should
seek advice from lawyers experienced in this area.
Taxpayers also need to be aware of a separate set of issues if
they have their premises visited by ATO officers.
Although it may be an offence for taxpayers to impede ATO
officers from exercising their powers, taxpayers and their advisers
should ensure, for example, that the information taken is
reasonably targeted. When the ATO's powers are used, most
taxpayers are taken by surprise and cooperate with the ATO. They
are not aware of any rights they may have in dealing with the
As a result, taxpayers may give the ATO more information than
required. This often happens when taxpayers want to discuss things
that are not strictly the subject of the ATO enquiry, or they
inadvertently waive legal professional privilege over documents
that the ATO is not entitled to take.
There is nothing to stop the ATO using information gathered in
the audit of one taxpayer against another taxpayer not the subject
of the audit. Seemingly harmless information volunteered to the ATO
about one entity could be damaging to someone else.
Regardless of whether the Bill is passed or not, taxpayers
should carefully manage their dealings with the ATO.
For more information about dealing with the ATO, please contact
HopgoodGanim's Taxation and Revenue team.
Exemptions or concessions on stamp duty could apply when contemplating the purchase or transfer of NSW real estate.
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